US equity futures erased a Wednesday decline and an index of Asian stocks traded higher as investors looked beyond the impact of rising oil prices to rekindle a rally in risk assets.
(Bloomberg) — US equity futures erased a Wednesday decline and an index of Asian stocks traded higher as investors looked beyond the impact of rising oil prices to rekindle a rally in risk assets.
Stocks in Japan and South Korea rose while Australian shares fluctuated and Hong Kong equities edged lower following their best day in six months. The gain in contracts for the S&P 500 reversed a small decline in the index on Wednesday. European futures advanced.
The bullish sentiment weakened the dollar after its biggest jump in a week on Wednesday. The pound gained ground even after Fitch Ratings downgraded its UK outlook to negative.
The action appeared to mark a rethink on the impact of Wednesday’s decision by OPEC+ to reduce daily oil production by two million barrels. The US oil benchmark jumped to a three-week high. The White House warned about negative effects on a global economy weathering curbs on Russian imports and said the US would release 10 million barrels from strategic reserves.
Higher energy prices can stoke inflation, delaying the prospect of a dovish pivot from the likes of the Federal Reserve. However, they also limit demand, slowing the economy in line with what the Fed hopes to achieve through tighter policy.
“Rising commodity prices have been and will be demand destructive,” said James Athey, investment director for Aberdeen Standard investments. “The Fed won’t hike until something breaks and there are a lot of fragilities in this system.”
Goldman Sachs Group Inc. increased its fourth-quarter price target for Brent crude oil to $110, implying a jump of almost a fifth from today’s level.
“We are here sitting at near record low inventories. Demand will increase this winter because a lack of gas will drive more oil demand and now we have a loss in supply from OPEC and likely from Russia,” said Damien Courvalin, head of energy research for Goldman.
Here’s What Goldman to UBS Say About Oil After Big OPEC+ Cut
Federal Reserve Bank of Atlanta President Raphael Bostic said on Wednesday he favored raising interest rates to 4.5% by the end of the year, implying a further 125 basis points of tightening. His San Francisco counterpart Mary Daly warned against expecting any rate cuts in 2023.
“Inflation fears may get assuaged but then they turn into growth fears and that turns into a problem for corporate earnings,” said Emily Roland, co-chief investment strategist for John Hancock Investment Management, in an interview with Bloomberg TV. “Even if rates do fall it’s probably too early to call the all-clear on stocks.”
Key events this week:
- Eurozone retail sales, Thursday
- US initial jobless claims, Thursday
- Fed’s Charles Evans, Lisa Cook, Loretta Mester speak at events, Thursday
- US unemployment, wholesale inventories, nonfarm payrolls, Friday
- BOE Deputy Governor Dave Ramsden speaks at event, Friday
- Fed’s John Williams speaks at event, Friday
Will earnings disappoint and push equities to new lows? This week’s MLIV Pulse survey asks about corporate earnings. It’s brief and we don’t collect your name or any contact information. Please click here to share your views.
Some of the main moves in markets:
Stocks
- S&P 500 futures added 0.5% of 1.44 p.m. in Tokyo. The S&P 500 fell 0.2%
- Nasdaq 100 futures rose 0.6%. The Nasdaq 100 fell 0.1%
- Japan’s Topix index climbed 0.7%
- Australia’s S&P/ASX 200 Index fell 0.1%
- South Korea’s Kospi index jumped 1.4%
- Hong Kong’s Hang Seng Index fell 0.4%
- Euro Stoxx 50 futures jumped 1.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro strengthened 0.3% to $0.9918
- The British pound gained 0.3% to $1.1363
- The Japanese yen added 0.1% to 144.54 per dollar
Cryptocurrencies
- Bitcoin gained 2% to $20,384.31
- Ether added 2.3% to $1,375.92
Bonds
- The yield on 10-year Treasuries fell one basis point to 3.74%
- Australia’s 10-year yield gained 16 basis points to 3.79%
Commodities
- West Texas Intermediate crude rose 0.2% to $87.91 a barrel
- Gold futures traded 0.4% higher at $1,723.42 an ounce
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
